Business owners/Entrepreneurs
The UAE has tightened up regulations related to anti money laundering and other activities. Transparency over business ownership through the UBO requirement is part of that. Image Credit: Agency

Dubai: More Dubai businesses are finding that what should be a routine process costing them Dh15 to complete is resulting in penalties of Dh15,000 when they do not comply. This is exactly what is happening for those licensed businesses that are not meeting the UAE’s crackdown on UBO (Ultimate Beneficial Owner) compliance requirements.

The Ultimate Beneficial Owner requirement relates to revealing anyone who has direct or indirect control of a business, and the UAE now requires all such information to be provided for the setting up or renewal of business licenses. The intention was to make businesses – and their owners – truly accountable and prevent any activity – such as money laundering or financing of terrorism - being carried out that flies under the radar.

And the penalties for non-compliance can get bigger – “Failure to comply could result in fines ranging up to Dh100,000, including suspension of trade licenses for a period between one month to 12,” said Atik Munshi, Managing Partner at Enterprise House, a consultancy. “The process of submission of the UBO requirement is swift and efficient.

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“But if an entity has failed to furnish its UBO requirements within the stipulated period, the time and process regarding acceptance would be solely dependent on the concerned local authority.”

The processes to be UBO-compliant can be done over a smartphone. All emirates now require their licensed businesses to ensure they furnish all these details. And June 30 was the last day for all such submissions.

Timeline to UBO
The deadline for compliance and filing as specified by the UAE Ministry of Economy for Ultimate Beneficial Owner was on or before June 30, though the deadline was extended to July 7, after which fines and penalties were being levied on account of non-compliance.

In accordance with Article 3 of the UBO Regulations, entities wholly owned by the local or federal government, or any-other companies wholly-owned by such companies, and entities in financial free zones are exempted from the UBO Regulations. Other than these, all entities have to file.

Cracking down

The Dubai’s Department of Economic Development has already issued fines for failure to comply, with 148 businesses penalised to date. Other emirates could be issuing their own strictures, and making it difficult for businesses to run their operations without them first revealing who their real beneficiaries are.

This sends a clear message that the UAE is not any kind of free-wheeling tax- free haven.

- Anoop Pillai

“We contacted all our clients to inform them about UBO regulations, and more than 85 per cent completed their filing on time,” said Anoop Pillai, Director – Legal Business Advisory at A&A Associates. “However, many business owners are still stranded outside the UAE, while others did not receive communication from us or from various government channels.

“Smaller establishments believed they were exempt and did not pay heed. We are now helping them file appeals because they missed the deadline. The process has been simplified since launch, and in some cases all it took was replying to an SMS sent out by DED.

“Free zones authorities have played an active role too in communicating with their clients. In the case of DMCC and DIFC free zones, filing of UBO was mandatory right at the time of forming the company.

The UAE is at the forefront of strengthening AML and combating the financing of terrorism, and this is one more significant step from the Ministry of Economy. Such measures only increase investor confidence – we are currently receiving more than 1,000 enquiries every month to establish new business here.

“This sends a clear message that the UAE is not any kind of free-wheeling tax- free haven.”

Atik Munshi of Enterprise House
Atik Munshi of Enterprise House: "Penalties are to be imposed on all entities falling within the scope and provision of Cabinet Resolution No. (58) of 2020 (UBO Regulations) for non-compliance." Image Credit: Virendra Saklani/Gulf News

Who needs to register and how

If there is only one individual or set of individuals owning the business, the process of registering is quite straight-forward. But there are instances where true ownership is “hidden” under layers of differing ownership structures. This is what the UBO rule is trying to unearth. And those businesses that fail to provide these now find themselves under scrutiny, not to mention having to pay penalties.

“All entities unless exempted are required to submit to the authority a ‘statement of UBO’, ‘statement of shareholders’ register’, and if any, a ‘statement of nominee shareholder’,” said Munshi. “Certain UAE jurisdictions require the support documents to be attested and other jurisdictions require these statements to be signed and verified by the authorized representative. All entities are required to maintain a register of the statements in their office premises as well.”

Change of ownership

In case a business finds a new owner, this too must be notified to the Registrar within 15 days from the date of any amendment.

Take these steps to be UBO-compliant
At the time of a business' incorporation, the authorities now are seeking details of UBO. In case of shareholding holding by an individual, details are usually passport copies and utility bill copies along with nature, type and percentage of holding in the company, according to Nimish Goel, Partner at WTS Dhruva Consultants.

Since UBO is a one-time compliance, in case the details are submitted at the time of incorporation, the next compliance would happen only when the UBO changes.

Currently, there is no relaxation provided to offshore companies and they also need to comply with the regulations.